Muddy Waters Capital LLC
Director of Research: Carson C. Block, Esq.
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Page 1 of 17
Muddy Waters Capital LLC (“Muddy Waters”) announced in a presentation on June 7, 2017 that
we are short Man Wah Holdings Ltd. (“MWH”, 1999 HK).MWH promptly halted the stock and
on June 9th issued a clarification announcement in response.MWH’s response accurately quotes
the presentation slides, although it does not present the complete deck.We address MWH’s
Our opinion remains that MWH is likely committing fraud.We presented six arguments in the
In our view, MWH has only attempted to substantively address two of these points: The New
High Technology Enterprise income tax preference it reported for its Huizhou entity, Man Wah
Furniture Manufacturing (Huizhou) Co. Ltd.; and, our argument that the company has
undisclosed debt of HK$1.55 billion.This report will first cover the four arguments we view as
having been left without substantive response, and then will provide our thoughts on the NHTE
and debt responses.This report is limited to the material in the presentation and MWH’s
responses, and is not a complete discussion of our research on MWH.
Too Good to be True
Our presentation began with a riddle:
Q: What’s made out of wood, glue and foam, and is purportedly more profitable than an
A: a couch
1 Including the introduction, which laid out a “too good to be true” argument.
Page 2 of 17
We then showed three graphs:
Page 3 of 17
It is noteworthy that AAPL has been attacked for engineering its tax rate lower through transfer
pricing arrangements, and yet MWH, which generates approximately 85% of its revenue in the
U.S. and China, has a much lower reported tax rate.
We showed two pictures of a MWH sofa purchased in the U.S. that we had gutted.
Page 4 of 17
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